India has shelved a proposal to mandate coal imports in order to boost dwindling stockpiles at the country’s power plants, as rising seaborne prices and a weaker rupee inflate the costs of incoming shipments.
The government in recent weeks discussed a plan to ask power plants to blend imported grades with domestic coal in order to ease the current supply crunch, according to people familiar with the matter, who asked not to be named as the discussion was private. High costs, however, mean that proposal has now been shelved.
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Policymakers have instead asked state-owned giant Coal India Ltd. to boost output and the railway to help secure timely transport to power stations, they added.
The power ministry and Coal India didn’t immediately respond to requests for comment.
The country’s coal reserves have plunged to the lowest in nearly five years after a poor monsoon kept temperatures elevated well past the summer months, spurring electricity demand for cooling and irrigation. Below-normal rains also curbed hydropower output, stretching generation from coal plants and draining their reserves.
Nearly half the nation’s power plants had “critical” levels of fuel inventory as of Oct. 17, holding less than a quarter of what’s required, data from the power ministry show. The nation’s electricity deficit also surged in September, marking the worst power shortages for the month in nearly a decade.
The government has previously dealt with coal crunches by demanding plants accept imports to supplement domestic supplies. But benchmark thermal coal prices are currently at the highest in three years, according to data compiled by Bloomberg, deterring purchases at a time when higher oil prices have already driven up the country’s energy bill.
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With cooler weather setting in, the government expects power consumption to slow just as reserves are replenished. Mean temperatures are expected to decline slightly over the next two weeks, while still remaining above the 30-year normal, according to the European Centre for Medium Term Forecasting.
While power demand remains high in October, inventory depletion has slowed. Average daily reduction at domestic coal-burning facilities in the first 17 days of October was about 48,000 tons, a fifth of the rate seen last month, according to Bloomberg calculations based on power ministry data.